Great American Finds Buyer for Credit Cards

In a deal that will cost 50 employees their jobs, Great American First Savings Bank said Tuesday that it has reached an agreement to sell its $210-million credit card portfolio to a unit of Household International, a consumer finance, insurance and manufacturing concern based in Prospect Heights, Ill.

Terms of the sale of the operation to Household Bank N.A. of Salinas, Calif., were not disclosed, but Great American said it would post a $10-million gain on the sale in its third-quarter financial statement. Great American is selling 188,000 Visa, Visa Gold, Mastercard and Gold Mastercard accounts.

Great American, a San Diego-based savings and loan, put the credit card division up for sale in March, saying the business had insufficient volume to justify its high operational and marketing costs. Great American also said chances were good for an economic downturn later this year that would cause an increase in delinquent accounts and hurt the business.

Household Bank President Joseph Saunders said in a telephone interview that a credit card operation should have a minimum of “three-quarters of a million to 1 million cards. The bigger you are, the more economies of scale you have.”

With only $210 million in receivables, Great American’s credit card operation pales in comparison with industry leader Citibank, whose receivables are about $12 billion.

Household Bank, whose credit card receivables of $1 billion rank 15th among U.S. credit card operations, has grown since July, 1987, through the acquisition of credit card units from Avco Financial Services, Beverly Hills Savings and Colonial National Bank.

Based in a Chicago suburb, Household International is best known for its Household Finance consumer finance operation, which last year had revenue of more than $2 billion.

Great American spokesman Kenneth Ulrich said that, of the credit card unit’s 115 employees as of last March, 55 have found jobs within Great American and 10 have resigned. The remaining 50 employees will be given severance pay, extended insurance coverage and their walking papers when the sale of the unit closes sometime in mid-September.

“They have known since March this was coming,” Ulrich said of those employees to be laid off.

Great American said it will continue to offer bank credit cards to its customers through a relationship with Household Bank. No immediate changes in conditions or terms of the accounts are planned.

Great American is the second major San Diego thrift to dump its credit card business in recent years. Home Federal Savings sold its $335-million portfolio in 1985, absorbing a loss reserve of $35 million in the third quarter of that year.

Imperial Savings has more than $200 million in its Visa credit card account portfolio. But Imperial has no plans to sell its operation, which a spokeswoman described as “very” profitable.